U.S. 10-year bond yield rises higher, oil tops $80

NEW YORK (Reuters) – Yields on benchmark 10-year U.S. Treasuries rose on Thursday to their highest level in about seven years, extending this week’s bond market selloff and pushing the U.S. dollar to a four-month peak against the yen.

Oil prices topped $80 a barrel for the first time since November 2014 before pulling back.

Wall Street’s main stock indexes slipped, wobbling amid trade jitters as the United States and China hold talks. European stock markets climbed and Britain’s FTSE 100 notched a record closing high.

The rising U.S. Treasury yields have been a driver across financial markets this week and come as data shows a strong U.S. economy that could indicate firming inflation

The benchmark 10-year U.S. Treasury note yield rose above 3.1 percent, continuing a surge from earlier in the week.

“I think it’s the same thing we have had really for the past couple of weeks: The inflation trade is being put on,” said Walter Todd, chief investment officer at Greenwood Capital in Greenwood, South Carolina.

The rise in bond rates, the dollar and oil “is being driven by the same backdrop, which is the U.S. economy is hitting on all cylinders,” Todd added.

On Wall Street, the Dow Jones Industrial Average <.DJI> fell 54.95 points, or 0.22 percent, to 24,713.98, the S&P 500 <.SPX> lost 2.33 points, or 0.09 percent, to 2,720.13, and the Nasdaq Composite <.IXIC> dropped 15.82 points, or 0.21 percent, to 7,382.47.

The major indexes for the month of May so far are all up more than 2 percent.

The rise in yields “has added a little bit of volatility in markets, no question. But I don’t think it would be enough to derail the recent move in stocks,” said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco.

U.S. President Donald Trump said that China and other countries had become “very spoiled” on trade, as U.S. and Chinese officials hold high-level talks in Washington on trade ties.

“I think this trade mess is certainly affecting the mood and uncertainty, and it seems to me the market is negative because this whole trade debate with tariffs,” said Jim Bell, president of Bell Investment Advisors in Oakland, California.

U.S. 10-year Treasury yields rose, extending this week’s bond market selloff, as traders and investors have not reached a consensus on whether it was time to buy or if the market was vulnerable to more selling.

Benchmark 10-year notes <US10YT=RR> last fell 5/32 in price to yield 3.1131 percent, from 3.095 percent late on Wednesday.

“The market is trying to figure where the bottom is. At this point, it is not clear,” said Mary Ann Hurley, vice president of fixed income with D.A. Davidson in Seattle.

The dollar index <.DXY>, which measures the greenback against a basket of major currencies, rose 0.1 percent. The Japanese yen <JPY=> was flat versus the U.S. currency at 110.79 per dollar.

Concerns that Iranian exports could fall because of renewed U.S. sanctions, reducing supply in an already tightening market, drove oil above $80 a barrel for the first time since November 2014.

Brent <LCOcv1> settled up 2 cents at $79.30 a barrel, after rising as high as $80.50. U.S. crude <CLcv1> settled flat at $71.49 a barrel.

Dollar, Treasuries and oil on the boil – https://reut.rs/2KxSlVk

Graphic: World FX rates in 2018 – http://tmsnrt.rs/2egbfVh

(Additional reporting by Richard Leong and Stephen Culp in New York; Editing by James Dalgleish and Leslie Adler)